Dragon Oil, a subsidiary of Dubai's Emirates National Oil Company (Enoc), has signed an agreement with Turkmenistan's state-owned Turkmen Oil to extend their partnership for another 10 years.
Under the $1 billion renewed partnership, which begins in May 2025, Dragon Oil will pay $500 million in cash, with the remaining half spread out over the next 13 years, UAE state news agency Wam reported.
Dragon Oil has invested about $8.1bn in well drilling and production infrastructure over its 22 years in Turkmenistan, achieving a cumulative production of 437 million barrels of crude oil.
The Cheleken complex, located in the East Caspian Sea in Turkmenistan, is the main production asset of Dragon Oil. It consists of two major offshore oil and gasfields, Lam and Zhdanov, which have been developed and maintained since 2000.
The partnership also includes another potential complex within the vicinity.
The extension of the partnership will allow more for investment opportunities and help in completing plans for increasing production capacity as part of a "constant commitment by Dragon Oil towards its profitable investments in the oil and gas sector in Turkmenistan", said Ali Al Jarwan, chief executive of Dragon Oil.
"The signing of this contract also marks a milestone in Dragon Oil's journey in a sustainable strategic growth and within the plan to complete growth and expansion in its operating markets, including Turkmenistan, Egypt and Iraq," he said.
Among the activities to be strengthened are the exploration and development of fields and repair wells, which would ultimately help to increase production capacity to 300,000 barrels per day by 2026, from about 160,000 at present, Mr Al Jarwan said.
Future investments are projected to reach between $7bn and $8bn, while production levels are estimated between 60,000 to 70,000 barrels a day, hitting about 350 million barrels by 2035, the company said.
Turkmenistan had more than 600 million barrels of proven oil reserves and 19.5 trillion cubic metres of proven natural gas reserves at the end of 2020, according to the BP Statistical Review of World Energy 2021.
Oil production in the country stood at 216,000 bpd in 2020, the report found.
The new investments will contribute to the further development of UAE-Turkmenistan ties, with both countries looking into various economic and investment fields, said Saeed Al Tayer, chairman of Enoc and Dragon Oil.
Dragon Oil also aims to launch several sustainable exploration activities within Turkmenistan with long-term benefits, said Mr Al Tayer.
Since 2018, Dragon Oil has shifted production in Turkmenistan from the natural depletion of conventional oil to production supported by water injection, artificial lifting and, lately, gas injection.
French business
France has organised a delegation of leading businesses to travel to Syria. The group was led by French shipping giant CMA CGM, which struck a 30-year contract in May with the Syrian government to develop and run Latakia port. Also present were water and waste management company Suez, defence multinational Thales, and Ellipse Group, which is currently looking into rehabilitating Syrian hospitals.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Who's who in Yemen conflict
Houthis: Iran-backed rebels who occupy Sanaa and run unrecognised government
Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council
Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south
Habrish 'rebels': Tribal-backed forces feuding with STC over control of oil in government territory
